Supporting Guidance: employer compliance: guidance by subject: working rule agreements (WRA): holiday pay
There are no special taxation arrangements relating to the payment of holiday pay and PAYE is to be deducted in all cases where the employer makes payment to the employee direct.
NIC is not payable when holiday pay is financed from a stamp fund scheme, even if the employer makes payment into the fund. However it is payable in all cases where the employer makes payment direct.
Where an employer has failed to apply PAYE and NIC correctly, you should
explain to the employer
- the correct procedure for the future,
- how to make any necessary open year adjustments COG906520, and
seek recovery, where appropriate, for closed years.